Malaysia Airlines losses widen after air disasters

Julia Zappei
Malaysia Airlines losses widen after air disasters

Kuala Lumpur (AFP) - Crisis-stricken Malaysia Airlines said Thursday its second-quarter loss nearly doubled and forecast more red ink in the second half of the year, as two crippling air disasters sent passenger bookings tumbling.

The flag carrier said it posted a 305.7 million ringgit ($97.2 million) loss in the April-June quarter, which followed the March 8 disappearance of flight MH370 with 239 passengers and crew aboard.

That compared to a 175 million ringgit loss in the same period of last year.

The latest results mark the sixth straight quarterly loss for Malaysia Airlines (MAS), which has struggled to stay competitive and is now in dire financial straits following the loss of MH370 and the July 18 shooting down over Ukraine of flight MH17, which killed all 298 aboard that plane.

"The impact of the MH370 incident and intensified competition resulted in" a 6.7 percent drop in bookings, it said in a statement to the Malaysian stock exchange.

The loss was less than what some analysts had expected. In the first quarter the carrier lost 443 million ringgit amid the impact of MH370.

- Outlook worse -

But the airline -- which is in the process of being taken over by Malaysia's state investment fund as part of a bid to restructure and rescue the company -- warned that second-half results will be even worse.

"The full financial impact of the double tragedies of MH370 and MH17 is expected to hit Malaysia Airlines in the second half of the year, where we saw a sharp decline in average weekly bookings by 33 percent immediately after the MH17 incident, with numerous flights cancelled," it said.

MAS has bled money for years, losing a combined $1.3 billion over the past three calendar years before 2014, as intensifying competition from more nimble rivals like Malaysia's fast-growing budget carrier AirAsia have lured away travellers with their rock-bottom pricing.

But the sudden association with tragedy for an airline that previously had a solid safety record has pushed it the financial precipice.

Investment arm Khazanah Nasional, which owns 70 percent of the carrier, has said it will announce a major restructuring plan possibly as early as Friday in a bid to save the 68-year-old airline, one of Malaysia's biggest brands.

Speculation is that the restructuring could include large layoffs from among MAS's nearly 20,000 employees, the slashing of unprofitable long-haul routes to Europe and other destinations, and a management shake-up.

MAS Chief Executive Ahmad Jauhari Yahya said the company had to undergo "a thorough re-examination and re-evaluation".

- 'Immensely difficult' -

Analysts have long predicted deep financial trouble for MAS, blaming poor management, a bloated workforce, and powerful unions for preventing the carrier making the necessary changes to stay competitive.

They estimate MAS is currently burning through its cash reserves at a rate of at least $2 million a day to keep the carrier afloat.

Some analysts are pessimistic about whether Khazanah can save MAS, as a series of previous turnaround plans sanctioned by the investment fund over the years have failed.

Critics say only regular transfusions of taxpayer money by Malaysia's long-ruling government have saved the carrier. The amounts have not been disclosed.

"It will be immensely difficult for MAS to recover... They have dug a hole big enough to swallow the entire company," said Shukor Yusof, an analyst with Malaysia-based aviation consultancy Endau Analytics.

"Unless brutal, structural changes are made, there is no long-term future. New CEO, new logo, new motto are just cosmetic changes."

MH370 inexplicably diverted from its Kuala Lumpur-Beijing course, and the Malaysian government says it is believed to have gone down far to the south in the Indian Ocean.

Both the airline and the government came under fierce criticism over lack of transparency and their handling of the disaster, one of aviation's biggest mysteries.

MH17 went down over a region of eastern Ukraine held by pro-Russian rebels.

It is believed to have been shot down by a missile but investigators still don't know who was responsible.